Onetime New York Islanders part owner Stephen Walsh was hit with the maximum sentence of 20 years for a $50 million fraud on Wednesday, but the judge postponed imposing it to let stunned defense lawyers consider an appeal or voiding his guilty plea.
Walsh, 70, an Islanders executive and co-owner from 1991 to 2000, was accused in 2009 of bilking investors in his WG Trading Company to finance a lavish lifestyle. He pleaded guilty in April, and partner Paul Greenwood pleaded guilty in 2010.
At the sentencing before U.S. District Judge Miriam Cedarbaum in Manhattan, Walsh said he was "deeply sorry," while his lawyer argued most investors were made whole and said Walsh deserved credit for charitable work, such as co-founding a Long Island Alzheimer's foundation.
They asked for 18 to 24 months with community service.
But Cedarbaum was unmoved, noting that the scam went on for 13 years and Walsh fought the charges for five years before pleading guilty and taking responsibility.
"The proceeds of this scheme were used for personal extravagances and high living," she said. "Lots of people lost lots of money, and some of it will trickle back to them, but that does not justify using it for your own benefit and spending it on frivolous things."
The judge said she was imposing the maximum penalty for securities fraud of 20 years. That was the sentence recommended by probation officers, called for under federal sentencing guidelines and urged by prosecutors.
Walsh, as part of his plea, had agreed to not appeal any sentence up to 240 months.
But white-collar defendants frequently get more lenient treatment -- in part because many judges feel federal guidelines overemphasize the significance of the amount of loss in calculating sentences -- and the sentence produced gasps from Walsh's friends and family in the gallery.
"Oh my God!" said one woman.
Defense lawyer Michael Tremonte first asked Cedarbaum to impose 20 years and a day, so it would become appealable.
"I don't think anyone expected we would be at the outer range of the hypothetical guideline range," he said. "There is not another case even remotely like it where a 20-year sentence has been imposed."
The judge refused, telling him that she would not circumvent a plea agreement in which Walsh gave up his right to appeal the sentence. But she agreed to postpone imposing the sentence until Tuesday, to give Tremonte the chance to consult with Walsh and research grounds for withdrawing the plea.
Tremonte and prosecutors had no comment after the hearing.
Walsh and Greenwood were charged soliciting $7.6 billion, mostly from institutional investors, to pursue a conservative investing strategy, and then misappropriating it.
Walsh allegedly used investor money to finance a divorce settlement and fund businesses for his children, and Greenwood purchased expensive stallions and high-priced teddy bears.
Greenwood is scheduled to be sentenced next month.